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Transcript of India Union Budget 2017 - Krayman · India Union Budget 2017 KrayMan ... Reduction in basic tax...
KrayMan India Union Budget 2017
The Union Budget 2017, fourth budget under the Narendra
Modi Government, was presented by the Hon‟ble Finance Minister Arun
Jaitley on February 1, 2017. Budget 2017 was marked by historic economic
policy developments in the midst of mid-year GST roll out, and
demonetization.
“Spring is a season of optimism”, Budget 2017 not only changed the tradition
of being presented on the last day of February, but also the Railway Budget
was combined with the General Budget for the first time in independent India.
The Budget seeks to do just what it promises “Transform, Energize and
Clean India” – TEC India. The underlying theme of countless expectations
was good governance. The digitization agenda and the curbing of the cash
economy will be supported by fiscal prudence.
Historic and impactful economic reforms and policy making were announced
to ensure that the fruits of growth reach the rural areas, farmers, poor &
underprivileged, women and other vulnerable sections of the society. The
Budget focused on energizing the youth to reap the benefits of growth and
employment to unleash their true potential and clean the country from the
evils of corruption, black money and non-transparent political funding.
Key tax proposals are mostly in the nature of anti-abuse provisions, to ensure
that their implementation does not lead to hardship and targeting of genuine
and legitimate transactions.
Leaving the indirect tax rates unchanged and amending only a few critical
areas that needed attention shows the intent of the Government to roll out
GST by 1 July, 2017.
GDP growth @ 7.1%
Average CPI inflation @ 4.85%
Industrial production growth @
2.6%
Fiscal deficit @ 3.2%
Revenue Deficit @ 2.1%
Highest forex reserves of $ 361 B
INR depreciation of 3.3%; Average
INR 67.21 / $
FDI jumps 60% from Oct „14 to
Sept „16 ($ 77.9 B)
Economic Indicators
India moves up 16 spots to 39th rank in the WEF’s Global Competitiveness Index
KrayMan India Union Budget 2017
Tax Administration: Honoring the honest.
Farmers, for whom we have committed to double the income in
five years
Rural population: Providing employment and basic infrastructure
Youth: Energizing them through education, skills and jobs.
Poor and the underprivileged: Strengthening the systems of
social security, health care and affordable housing.
Infrastructure: For efficiency, productivity and quality of life.
Financial sector: Growth and stability through stronger
institutions
Digital economy: For speed, accountability and transparency.
Public service: Effective governance and efficient service
delivery through people‟s participation.
Prudent fiscal management: To ensure optimal deployment of
resources and preserve fiscal stability.
Agenda for 2017-18 is
“Transform, Energize
and Clean India” – TEC
India
FIPB abolished, New
FDI Policy underway
Rules to curb black
money and curtail illicit
deposits
Creation of integrated
public sector oil major
Recapitalization of
public sector banks
Dis
tin
ct T
hem
es
KrayMan Sectoral Announcements
Infrastructure
• Significant allocation; focus on railways and roads
• Railway Station redevelopment projects; ~ 25 stations
targeted in 2017-18
• New Metro Rail Policy; implementation & indigenization of
hardware & software
• PPP mode for operation and maintenance of select airports
in Tier 2 cities
• Second phase of Solar Park development for additional 20
K MW capacity to be started
• Steps to rationalize tax provisions, disincentive black
money, promote digital economy & bring transparency
Technology & Start-ups
• New Ministry of Electronics and Information
Technology (MeITY) to promote Digital India
• Pilot Digital Village platform for services like tele-
medicine, tele-education, LED street lighting, Wi-Fi
hotspot and skill development
• India BPO Promotion Scheme for financial support
• Draft National Policy on Software Products 2016 to
stimulate emerging software products ecosystem
• Strengthen PPP for solution abilities, availability of
digital architects and global experience
Real Estate
• Focus on reforms and affordable housing
• 10 M houses by 2019 to provide homes to houseless
and those living in kutcha houses
• INR 230 B allocated to Pradhan Mantri Awas Yojana
• Emphasis on
‒ helping the sector raise funds
‒ providing clarity to reduce tax litigation and
ambiguity
‒ introducing anti-abuse measures
Logistics
• Railway Budget merged with General Budget to
facilitate multi modal transport planning between
railways, highways and inland waterways
• Multi modal logistics parks & transport facilities
proposed may drive growth
• Not being completely organized sector, anti black
money and digital economy could act as a deterrent
KrayMan Sectoral Announcements
Life Sciences
• New Drugs and Cosmetics Rules for availability at
reasonable prices and promote generic medicines
• New rules for medical devices to reduce cost
• Two new All India Institutes of Medical Sciences in
Jharkhand and Gujarat
• Action plan to eliminate critical diseases i.e. Kala-Azar
and Filariasis, Leprosy, Measles & tuberculosis
• Aadhar based Smart Cards for senior citizen
containing their health details
Telecom
• Big push towards the digital economy
• Rural connectivity, BharatNet Project & DigiGaon
initiative may boost growth
• BharatNet Project - high speed broadband connectivity
and access to digital services in rural areas
• DigiGaon initiative to provide tele-medicine, education
and skills through digital technology
• Increased allocation towards M-SIPS making India a
global electronic manufacturing hub
• 2% SAD on populated „printed circuit boards‟ for mobile
phones to promote domestic manufacturing
Defense
• Marginal increase of 5.4% over the last year budget
• Accounts for 12.22% of the total budget allocation
• Allocation for „Make in India‟ programs and R&D
• Capex decline from 34.7% to 33%
• Increase in revenue expenditure due to pay &
allowances
Automobile Sector
• No significant announcements pursuant to „Make in
India‟ & changes in emission and safety regulations
• Increased allocation for rural economy &
infrastructure promises well for automotive industry
• Likely beneficiaries Two-Wheeler, Tractors,
commercial vehicles and earth-mover industry along
with their suppliers.
• Increased allocation for MSIPS and EDF to fillip
manufacture of electronic components
• Electric Vehicle, R&D expenditure, Vehicle Scrapping
policy, relief from excise duty missed
KrayMan Key Pillars
Rates of Income Tax
Additional resource
mobilization Promoting affordable
housing
Measures for
stimulating growth
Ease of doing
business
Promoting digital
economy
Anti abuse measures Benefit for NPS
subscribers
Transparency in
Electoral Funding
Rationalisation
Measures
10 Key Pillars of the Budget
KrayMan Reduction in Tax Rates
Proposal Individuals / Association of Persons /
Hindu Undivided Families (HUF) Companies
Reduction in tax rate &
changes in surcharge
Reduction in basic tax rate from 10% to 5%
in respect of income between INR 250,000
and INR 500,000 (in case of senior citizens
between 60-80 years, income between INR
300,000 to INR 500,000)
Surcharge of 10% (on tax) introduced for
income between INR 5,000,000 to INR
1,000,000
Tax rebate available to individuals reduced
from INR 5,000 to INR 2,500 in respect of
incomes below INR 350,000.
Corporate tax rate reduced to
25% (from 30%) for
companies with a turnover <
INR 500,000,000 in FY 2015-
16.
No other change in corporate
tax rates / Minimum Alternate
Tax Rate.
KrayMan Resource Mobilization
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Taxation of
dividend income
Applicable from:
AY 2018-19
onwards
As per existing section
115BBDA, income by way
of dividend > Rs.
1,000,000 is taxable @
10% on gross basis in
case of a resident
individual, Hindu
undivided family or firm.
Extending the applicability of said
provision to all resident assessees
except domestic company and certain
funds, trusts, institutions, etc.
To ensure horizontal equity
among all categories of tax
payers deriving dividend-
income
Liability on
Individuals /
HUFs to withhold
tax (TDS) on
rent-payments
Applicable from:
1 June 2017
onwards
As per section 194-I, an
Individual or HUF, if he is
not liable for tax audit in
the last year, is not
required to withhold tax on
payment of rent to
landlord
New section 194IB introduced - an
Individual or HUF, if he is not liable for
tax audit in the last year, is required to
withhold tax (TDS) @ 5% in case of
rent payments exceeding INR 50,000
per month
Requirement to deduct tax only once in
a year (last month of the previous year)
No requirement for deductor to obtain
TAN (tax deduction account no.)
Where landlord does not have PAN
(section 206AA), amount of deduction
not to exceed rent payable for last
month of previous year
To widen the scope of tax
deduction at source keeping
compliance burden minimum
at the same time
KrayMan Affordable Housing & Real Estate Sector
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Incentives for
Promoting
Investment in
immovable
property
Applicable from:
AY 2018-19
onwards
Concessional rate of tax and also
indexation benefit is available for long
term capital gains
To qualify for long-term asset,
assessee is required to hold the asset
for more than 36 months subject to
certain exceptions (for example 24
months for unlisted shares)
Section 2 (42A) amended to
reduce the period of holding
from the existing 36 months
to 24 months in case of
immovable property, being
land or building or both, to
qualify as long term capital
asset.
To promote real-estate
sector and to make it more
attractive for investment
Rationalisation of
Provisions of
Section 80-IBA to
promote
Affordable
Housing
Applicable from:
AY 2018-19
onwards
Existing section 80-IBA provides for
100% deduction in respect of the
profits and gains from developing and
building certain housing projects
subject to conditions such as,
Limit of 30 square meters for built-up
area of residential unit in respect of
project located in Chennai, Delhi,
Kolkata and Mumbai, OR within 25
kms from the municipal limits of these
4 cities.
Project has to be completed within 3
years.
Relaxations granted
Size of residential unit to be
measured considering
"carpet area" & not "built-up
area”
Restriction of 30 square
meters not to apply to a
place located within 25 km
from the municipal limits of
the Chennai, Delhi, Kolkata
or Mumbai
Period of completion of
project extended from 3
years to 5 years
To promote development of
affordable housing sector
KrayMan Affordable Housing & Real Estate Sector
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Capital gains in
case of joint
development
agreement
Applicable from:
1 April 2017
onwards
Execution of Joint
Development Agreement
between the owner of
immovable property and the
developer triggers the capital
gains tax liability in the hands
of the owner in the year in
which the possession of
immovable property is handed
over to the developer for
development of a project.
In case of an individual or Hindu
undivided family, who enters into
joint development agreement,
capital gains shall be taxable in the
year in which the certificate of
completion for the whole or part of
the project is issued by the
competent authority.
Stamp duty value of his share in
the project on the date of
certificate of completion (increased
by any monetary consideration
received, if any) shall be
considered to be full value of the
consideration received.
Benefit not applicable to an
assessee who transfers his share
in the project to any other person
on or before the date of issue of
said certificate of completion. In
such a situation, capital gains as
per general provisions of the Act
shall be considered to be the
income of the previous year in
which such transfer took place
To minimize the genuine
hardship which the owner of
land may face in paying
capital gains tax in the year
of transfer
KrayMan Affordable Housing & Real Estate Sector
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Shifting base
year from 1981 to
2001 for
computation of
capital gains
Applicable from:
AY 2018-19
onwards
For computing capital gains in
respect of an asset acquired
before 01.04.1981, the assessee
is allowed an option of either to
take the fair market value of the
asset as on 01.04.1981 or the
actual cost of the asset as cost of
acquisition.
The assessee is also allowed to
claim deduction for cost of
improvement incurred after
01.04.1981, if any.
Revision of Base Year from 1981
to 2001
Cost of acquisition of an asset
acquired before 01.04.2001
shall be allowed to be taken as
fair market value as on
1.4.2001
Cost of improvement shall
include only those capital
expenses which are incurred
after 01.04.2001
Base year for computation
of capital gains has become
more than 3 decades old.
Assessees are facing
difficulties due to non-
availability of relevant
information as on
01.04.1981.
Expanding the
scope of long
term bonds under
54EC
Applicable from:
AY 2018-19
onwards
As per section 54EC, long term
capital gain is tax-exempt if the
assessee invests the whole or any
part of capital gains in
Bonds issued by the National
Highways Authority of India, or
Bonds issued by Rural
Electrification Corporation Limited
Scope of investment expanded –
Investment in any bond
redeemable after 3 years which
has been notified by the Central
Government shall be eligible for
exemption.
To widen the scope for
sectors which may raise
fund by issue of bonds
eligible for exemption under
section 54EC
KrayMan Affordable Housing & Real Estate Sector
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
No notional income
for house property
held as stock-in-
trade
Applicable from:
AY 2018-19
onwards
Section 23 of the Act provides
for the manner of determination
of annual value of house
property.
Where a house property is
held as stock-in-trade and the
property is not let during the
whole or any part of the
previous year, the annual
value of such property, for
upto 1 year from the end of the
financial year in which the
certificate of completion of
construction of the property is
obtained from the competent
authority, shall be taken to be
nil
Considering the business
exigencies in case of real
estate developers
KrayMan Measures for Stimulating Growth
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Extension of
eligible period of
concessional tax
rate on interest in
case of External
Commercial
Borrowing (ECB) &
Extension of
benefit to Rupee
Denominated
Bonds
Applicable from:
AY 2018-19
onwards
As per section 194LC, interest
payable to a non-resident by a
specified company on
borrowings made by it in foreign
currency from sources outside
India under a loan agreement or
by way of issue of any long-term
bond including long-term
infrastructure bond is eligible for
concessional TDS of 5 %.
Borrowings shall be made, under
a loan agreement at any time
between 1.7.2012 to 1.7.2017;
or by way of any long-term bond
between 1.10.2014 to 1.7.2017
Press Release dated 29.10.2015
was issued clarifying that TDS
@ 5 % would be applicable to
these bonds in the same way as
it is applicable for off-shore dollar
denominated bonds.
The concessional rate of 5%
TDS will now be available in
respect of borrowings made
before 1.7.2020.
Benefit of section 194LC
extended to rupee
denominated bond issued
outside India before 1.7.2020.
(applicable for AY 2016-17
onwards)
To encourage foreign
capital.
KrayMan Measures for Stimulating Growth
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Extension of
eligible period of
concessional tax
rate under section
194LD
Applicable from:
AY 2018-19
onwards
Existing section 194LD provides
for lower TDS at the rate of 5%
in the case of interest payable at
any time on or after 1.6.2013 but
before 1.7.2017 to FIIs and QFIs
on their investments in
Government securities and
rupee denominated corporate
bonds provided that the rate of
interest does not exceed the rate
notified by the Central
Government in this behalf.
Concessional rate of 5% TDS
on interest will now be
available on interest payable
before 1.7.2020
To encourage foreign
capital.
Carry forward and
set off of loss in
case of closely held
companies
Applicable from:
AY 2018-19
onwards
As per section 79, accumulated
losses of closely held companies
lapse in case of a change in
shareholding beyond 51%.
Relaxation granted in case of
start-ups, subject to the
condition that the original
shareholders continue to hold
their shares from the year in
which loss is incurred, to the
year in which the loss is
proposed to be set-off.
Any change in shareholding
of start-ups due to capital
infusions by new investors
should not affect carry
forward and set-off of
accumulated losses.
KrayMan Measures for Stimulating Growth
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Extending the
period for claiming
deduction by start-
ups
Applicable from:
AY 2018-19
onwards
Section 80-IAC provides that an
eligible start-up shall be allowed
a deduction of 100% profits from
eligible business for 3
consecutive years out of 5 years
beginning from the year in which
such eligible start-up is
incorporated.
Horizon of 5 years extended to
7 years
Start-ups may take time to
derive profit out of their
business.
Minimum Alternate
Tax (MAT)
Applicable from:
AY 2018-19
onwards
MAT credit allowed to be carried
forward for 10 years
Time-limit of 10 years
extended to 15 years. Foreign
Tax credit in excess of MAT to
be ignored for carry forward
purposes
Rationalisation of
Provisions relating to tax
credit for Minimum Alternate
Tax and Alternate Minimum
Tax
KrayMan Measures for Stimulating Growth
Budget Proposal Proposed Amendment Applicable from
Banking Sector Tax deduction in respect of provision for bad and
doubtful debts increased from 7.5% to 8.5% for banks.
Interest on loan from a co-operative bank to be
allowed as a deduction on payment basis, payment
should be made on or before due date of filing return
of income
AY 2018-19 onwards
Authority for
Advance Rulings
Merger of Authority for Advance Rulings for
income-tax, central excise, customs duty and service
tax
1 April 2017 onwards
KrayMan Promoting Digital Economy
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Restricting cash
donations
Applicable from:
AY 2018-19
onwards
As per section 80G, cash-
donations of more than INR
10,000 is not tax-deductible
Limit of INR 10,000 reduced to
INR 2,000
To encourage cashless
economy and transparency
Disallowance of
depreciation under
section 32 and
capital expenditure
under section 35AD
on cash payment
Applicable from:
AY 2018-19
onwards
Revenue expenditure incurred in
cash exceeding certain
monetary threshold is not
allowable as per section 40A(3)
of the Act (except in specified
circumstances)
Further, section 35AD provides
for investment linked deduction
on the amount capital
expenditure incurred, wholly or
exclusively for business, during
the previous year for a specified
business
Where an assessee incurs any
cash-expenditure for
acquisition of any asset
exceeding INR 10,000, such
expenditure shall be ignored
for the purposes of
determination of actual cost of
the asset (section 43)
Cash expenditure of INR
10,000 or more not to be
allowed as tax deduction u/s
35AD
To discourage cash
transactions
KrayMan Promoting Digital Economy
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Measures to
discourage cash
transaction
Applicable from:
AY 2018-19
onwards
Cash-payments of more than
INR 20,000 in a single day to a
person, is not allowable as tax
deduction
Limit of INR 20,000 reduced
to INR 10,000
To encourage cashless
economy and transparency
Measures for
promoting digital
payments in case
of small
unorganized
businesses
Applicable from:
AY 2017-18
onwards
Section 44AD provides for a
presumptive basis of taxation for
small businesses with turnover
upto INR 20,000,000.
8% of the turnover is treated as
taxable profits
Existing rate of 8% reduced
to 6% provided turnover is
received through banking
channels.
Otherwise, 8% continues to
remain taxable profits.
To promote digital
transactions and encourage
small unorganized business
to accept digital payments
KrayMan Promoting Digital Economy
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Restriction on cash
transactions
Applicable from:
1 April 2017
onwards
No specific prohibition / penalty on
cash receipts (other than loans
and advances)
Penalty u/s 271D introduced for
persons receiving INR 300,000
or more from single person in a
day in respect of a single
transaction /event / occasion
To achieve the mission of the
Government to eliminate
generation and circulation of
black money
Transparency in
Electoral Funding
Applicable from:
AY 2018-19
onwards
There is no restriction on receipt
of any amount of donation in
cash by a political party.
A Political party is required to file
its return of income u/s 139(4B),
if its income exceeds the
threshold limit (without
considering the exemption u/s
13A). However, filing of the
return is not a condition for
availing exemption under the
said section.
Additional conditions imposed
for eligibility to claim exemption
u/s 10(13A)
No cash-donations should be
received beyond INR 2,000
Filing of Return of income
within time limit made
mandatory for being entitled to
exemption
To discourage cash
transactions and bring
transparency in the source of
funding to political parties
KrayMan Ease of Doing Business
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Clarity relating to
Indirect transfer
provisions
Applicable from:
AY 2012 - 13
onwards
As per section 9, all income
accruing or arising, whether
directly or indirectly, from any
property / asset /source of
income / transfer of a capital
asset situate in India shall be
taxable in India
Finance Act 2012 (Explanation
5) clarified, that an asset or
capital asset, being any share or
interest in a company or entity
registered or incorporated
outside India shall be considered
to be situated in India, if the
share or interest derives, directly
or indirectly, its value
substantially from the assets
located in India.
Clarification that Explanation 5
shall not apply to any
investment held by non-
resident, directly or indirectly, in
a Foreign Institutional Investor
or Foreign Portfolio Investor as
these entities are regulated by
Securities Exchange Board of
India.
The proposed amendment is
clarificatory in nature.
KrayMan Ease of Doing Business
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Modification in
conditions of
special taxation
regime for off shore
funds under
section 9A
Applicable from:
AY 2016 - 17
onwards
Section 9A provides for a special
regime in respect of offshore
funds. Fund management
activity carried out through an
eligible fund manager acting on
behalf of eligible investment fund
is not treated as business
connection in India.
The benefit is subject to certain
conditions. One of the conditions
is that, monthly average of the
corpus of the fund shall be more
than INR 1,000,000,000 except
where the fund has been
established or incorporated in
the previous year in which case,
the corpus of fund shall not be
less than INR 1,000,000,000 at
the end of such previous year.
The condition regarding
minimum monthly average
corpus shall not be applicable in
the year in which the fund is
being wound up
In the year of winding up, it is
difficult to maintain such
minimum monthly average
corpus.
KrayMan Ease of Doing Business
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Enabling of Filing of
Form 15G/15H for
commission
payments specified
u/s 194D
Applicable from:
I June 2017 onwards
Section 194D provides for
withholding tax (TDS) @ 5% on
insurance commission beyond
INR 15,000 per year.
As per section 197A, tax shall not
be deducted, if the recipient
furnishes to the payer a self-
declaration in Form.No.15G/15H
declaring that the tax on his
estimated total income of the year
would be nil.
Presently, insurance commission
is not covered by provisions of
section 197A
Eligibility to submit form
15G /15H for non-
deduction of tax at source,
extended to insurance
commission u/s 194D
To reduce compliance
burden in the case of
Individuals and HUFs
Increasing the
threshold limit for
maintenance of
books of accounts in
case of Individuals
and Hindu undivided
family
Applicable from: AY
2018-19 onwards
Threshold limit for maintenance of
books of accounts by a person
carrying on business / profession,
is:
Minimum income of INR 120,000,
or
Minimum Turnover / Gross
receipts of INR 1,000,000
Increase in threshold limits
(for individuals / HUF) from
INR 120,000 to INR 250,000
and from INR 1,000,000 to
INR 2,500,000
To reduce compliance
burden in the case of
Individuals and HUFs
KrayMan Ease of Doing Business
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Exclusion of certain
persons (covered
by presumptive
basis of taxation)
from requirement of
tax-audit
Applicable from:
AY 2017-18
onwards
Threshold limit for tax audit u/s
44AB for regular businesses:
turnover should exceed INR
10,000,000
As per Press Release dated
20.6.2016, threshold limit for tax
audit u/s 44AB for assesses
covered by presumptive basis of
taxation u/s 44AD(1): INR
20,000,000
Provisions of Press Release
made part of section 44AB
To reduce the compliance
burden of the small tax
payers and facilitate the
ease of doing business
Simplification of
withholding tax
(TDS) on fee for
professional
services paid to call
centers
Applicable from:
1 June 2017
onwards
Withholding tax (TDS) @ 10%
applicable on payment of fee for
professional services
Rate of withholding tax
reduced from 10% to 2% in
case of payment to call
center
To facilitate ease of doing
business
KrayMan Ease of Doing Business
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Payment to
related persons
excluded from the
ambit of Specified
Domestic
Transactions u/s
92BA
Applicable from:
AY 2017-18
onwards
Payment to related parties u/s
40A(2)(b) covered within the scope of
section 92BA (Specified Domestic
Transactions)
Payment to related parties
excluded from the scope of
section 92BA (Specified
Domestic Transactions)
To relieve high compliance
burden on taxpayers such as
need to obtain chartered
accountant's certificate in
Form 3CEB providing the
details such as list of related
parties, nature and value of
transactions (SDTs), method
used to determine the arm's
length price, positions taken
etc.
Tax neutral
conversion of
preference shares
to equity shares
Applicable from:
AY 2018-19
onwards
Conversion of preference shares into
equity shares is regarded as „transfer‟
for the purpose of capital gains
taxation
Conversion of preference
shares into equity shares
excluded from the scope of
„transfer‟ for the purpose of
capital gains taxation
Current law provides for tax
neutrality to conversion of
bond or debenture of a
company to share or
debenture of that company.
However, no express clarity in
law regarding tax neutrality of
conversion of preference
shares into equity shares
KrayMan Ease of Doing Business
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Cost of
acquisition in Tax
neutral demerger
of a foreign
company
Applicable from:
AY 2018-19
onwards
As per section 47(vic), transfer of
shares of an Indian company by a
demerged foreign company to a
resulting foreign company is not
regarded as transfer.
Amendment to section 49 to
provide that cost of acquisition
of shares of Indian company
in the hands of the resulting
foreign company shall be the
same as it was in the hands of
demerged foreign company
To align provisions of section 49
(cost of acquisition) with section
47 (transfer) in case of
demerger of foreign company
Taxability of
income from
transfer of carbon
credits
Applicable from:
AY 2018-19
onwards
Income-tax Department has been
treating income on transfer of
carbon credits as business income
taxable @ 30%.
New section 115BBG inserted
- Income from transfer of
carbon credit taxable @ 10%
on gross basis
To encourage protection of
environment
KrayMan Ease of Doing Business
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Processing of
return within the
prescribed time
and enable
withholding of
refund in certain
cases
Applicable from:
AY 2017-18
onwards
As per section 143(1D), processing
of a return shall not be necessary,
where a notice has been issued to
the assessee u/s 143(2).
As per amendment by Finance Act,
2016 from AY 2017-18, processing
u/s 143(1) is to be done before
passing of assessment order.
Section 143(1D) shall cease
to apply in respect of returns
furnished for AY 2017-18
onwards.
However, to address
concerns of recovery of
revenue in doubtful cases,
new section 241A
introduced to provide that for
AY 2017-18 onwards, where
refund becomes due to the
assessee u/s 143(1) and the
Assessing Officer is of the
opinion that grant of refund
may adversely affect the
recovery of revenue, he
may, for reasons recorded in
writing and approval of
Commissioner, withhold the
refund upto the date on
which the assessment is
made.
To avoid delay in issuance
of refund in genuine cases
which are routinely selected
for scrutiny assessment
KrayMan Ease of Doing Business
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Capital gain
exemption on
Rupee
Denominated
Bonds
Applicable from:
AY 2018-19
onwards
Finance Act, 2016 amended
section 48 to provide that capital
gains arising on account of
appreciation of rupee against a
foreign currency at the time of
redemption of rupee denominated
bond of an Indian company, shall
not be taxable
Scope of capital gain
exemption extended to
secondary holders
Further, exemption granted
on transfer of rupee
denominated bond of Indian
company from one non-
resident to another non-
resident
Reserve Bank of India has
granted permission to Indian
corporates to issue rupee
denominated bonds outside
India to raise funds.
The amendment seeks to
encourage issue of rupee
denominated bonds as a
measure of raising funds and
making it more easily
transferrable
Enabling claim of
credit for foreign
tax paid in cases
of dispute
Applicable from:
AY 2018-19
onwards
Section 155 provides for procedure
for amendment of assessment
order in case of certain specified
errors.
Amendment proposed that
where credit for foreign taxes
paid is not given on the
ground that the payment of
such foreign tax was in
dispute, the tax department
shall rectify the assessment
order, if the assessee, within
6 months from the end of the
month in which the dispute is
settled, furnishes proof of
settlement of such dispute
To facilitate foreign-tax-
credit-payments.
KrayMan Ease of Doing Business
Budget Proposal AY Revision in time limit for Existing time limit Proposed time limit
Rationalisation of time
limits for completion of
assessment,
reassessment and
reducing the time for
filing revised return
2018-19 Regular Assessment (section
143)
/ Best-judgment Assessment
(section 144)
21 months from end of AY 18 months from end of AY
Reason for Amendment AY 2019-20
onwards
12 months from end of AY
As an effort to minimize
human interface and
move towards technology
Notice u/s 148
served on or
after 1 April
2019
Section 147 assessment / re-
assessment
9 months from the end of
the financial year in which
notice u/s 148 is served
12 months from the end of
the financial year in which
notice u/s 148 is served.
AY 2018-19
onwards
Filing revised return of income
u/s 139(5)
1 year from end of
relevant AY or before
completion of assessment,
whichever is earlier.
End of relevant AY or before
completion of assessment,
whichever is earlier.
For search and
seizure cases
conducted in
FY 2018-19
Making assessment order u/s
153A
21 months from end of the
financial year in which the
last of the authorizations
for search was executed.
18 months from end of the
financial year in which the
last of the authorizations for
search was executed
For search and
seizure cases
conducted in
FY 2019-20
onwards
12 months from end of the
financial year in which the
last of the authorizations for
search was executed
KrayMan Anti-Abuse Measures
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Exemption of long
term capital gains
tax u/s 10(38)
Applicable from:
AY 2018-19
onwards
Long term capital gain arising from
transfer of equity share of a
company or a unit of an equity
oriented fund is tax-exempt u/s
10(38), if:
Sale is undertaken on or after 1st
October, 2014, and
Is chargeable to Securities
Transaction Tax
Additional condition introduced
for tax exemption – Exemption
available only if acquisition of
share is chargeable to
Securities Transactions Tax
Immunity provided to protect
exemption for genuine cases
where the Securities
Transactions Tax could not
have been paid like acquisition
of share in IPO, FPO, bonus
or right issue by a listed
company, acquisition by non-
resident in accordance with
FDI policy of the Government
etc
Exemption u/s 10(38) being
misused by certain persons
for declaring their
unaccounted income as
exempt long-term capital
gains by entering into sham
transactions.
KrayMan Anti-Abuse Measures
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Fair Market Value
to be full value of
consideration in
certain cases of
transfer of shares
Applicable from:
AY 2018-19
onwards
In order to ensure that value of
consideration received is not
understated while computing
capital gains, the Act contains
provisions for assuming full value
of consideration in certain cases
(such as considering stamp duty
value as full value of consideration
for transfer of immovable property
in cases covered u/s 50C)
New section 50CA introduced
on similar lines as section 50C
Where consideration for
transfer of share of a company
(other than listed share) is less
than the Fair Market Value
(FMV) of such share, the FMV
shall be considered to be the
full value of consideration for
the purposes of computing
Capital gains
To avoid understatement of
capital gains on sale of
unlisted shares
Taxability of
money or
property received
without
consideration or
for inadequate
consideration
Applicable from:
1 April
2017onwards
Receipt of money or property
without consideration or for
inadequate consideration currently
does not attract taxability u/s 56(2)
in case of certain individuals,
HUFs, firm or company in certain
cases.
Scope of taxability increased to
cover all forms of assesses (i.e
not limited to individuals and
HUFs)
To prevent the practice of
receiving money or property
without consideration or for
inadequate consideration by
any and all forms of
assessees
KrayMan Anti-Abuse Measures
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Disallowance for
non-deduction of
tax from payment
to resident under
the head ‘Income
from other
sources’
Applicable from:
AY 2018-19
onwards
For computing income under the
head "Profits and gains of
business or profession", a
disallowance is made for non-
deduction of tax from payment to
resident as per section 40(a)(ia).
The corresponding provision for
disallowance is currently not
expressly covered under the
head „Income from other
sources‟
Section 58 amended to include
similar corresponding
disallowance (for non-deduction
of tax at source on payment to
resident) while computing
income from other sources.
To align provisions relating to
income from other sources
with profits and gains from
business / profession
KrayMan Anti-Abuse Measures
Budget Proposal New section 94B introduced
Limitation of Interest
deduction in certain
cases.
Applicable from:
AY 2018-19 onwards
Background
Most countries usually allow tax-deduction for interest paid while the dividend paid on equity
contribution is not deductible. Debt is often a more tax efficient method of finance than equity.
Multinational groups are often able to structure their financing arrangements to maximize these
benefits.
For this reason, country's tax administrations often introduce limit on the amount of interest that
can be deducted Such rules are designed to counter cross-border shifting of profit through
excessive interest payments, and thus aim to protect a country's tax base.
The Organization for Economic Co-operation and Development (OECD) in its Base Erosion and
Profit Shifting (BEPS) project had taken up this issue.
Proposed amendment
New section 94B introduced to provide that interest expenses claimed by an entity to its
associated enterprises shall be restricted to 30% of its earnings before interest, taxes,
depreciation and amortization (EBITDA) or interest paid or payable to associated enterprise,
whichever is less.
The provision shall be applicable to an Indian company, or a permanent establishment of a
foreign company being the borrower of money. Threshold for applicability – Interest expenditure
of INR 10,000,000 exceeding which the provision would be applicable.
Carry forward of disallowed interest expense to 8 years
Banks and Insurance business excluded considering the nature of these businesses.
KrayMan Anti-Abuse Measures
Budget Proposal Harmonizing Indian transfer pricing regulations with global standards
Secondary
adjustments in transfer
pricing cases
Applicable from:
AY 2018-19 onwards
Where the transactions between Associated Enterprises is not considered at ALP, then in
addition to the existing primary adjustments, a „secondary adjustment‟ is proposed to be levied in
case of difference in the adjusted profit and real cash situations. Threshold of INR 10,000,000 to
apply for primary adjustments, and applicable from assessment year 2017-18.
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Mandatory
furnishing of
return by certain
exempt entities
Applicable from:
AY 2018-19
onwards
Section 139(4C) mandates filing
of return by certain entities which
are exempt from income-tax.
Specific provision introduced
mandating following entities to file
tax-returns
Any person referred to in section
10(23AAA)
Investor Protection Fund
referred to in section 10(23EC)
/(23ED)
Core Settlement Guarantee
Fund referred to in section 10
(23EE)
Any Board or Authority referred
to in section 10(29A)
To verify that such entities
genuinely carry out the
activities for which the
exemption has been
provided to them u/s 10
KrayMan Anti-Abuse Measures
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Fee for Delayed
Filing of Return
Applicable from:
AY 2018-19
onwards
Section 271F provides for penalty
(optional) of INR 5,000 for non-
filing of tax-return before the end
of relevant AY
Provision relating to Penalty
replaced by late filing fee (section
234F). Where the tax-return is
not filed within the due-date, fee
payable as below:
INR 5,000 in case return is filed
before 31 Dec of AY
INR 10,000 in other cases
To improve tax compliance
Penalty on
professionals for
furnishing
incorrect
information in
statutory report
or certificate
Applicable from:
1 April 2017
onwards
Various provisions exist to
penalize the defaulting assessee
in case of furnishing incorrect
information. However, there exist
no penal provision for
professionals who certify the
same.
New section 271J introduced for
penalty of INR 10,000 on
professionals (chartered
accountants /merchant banker
/registered valuer) furnishing
incorrect information
To ensure that professionals
furnishing report or certificate
undertake due diligence before
making such certification
KrayMan Rationalization Measures
Rationalisation of section 115JB (Minimum Alternate Tax) in line with Indian
Accounting Standard (Ind-AS)
The Government notified the Indian Accounting Standards (Ind AS) which are converged with
International Financial Reporting Standards(IFRS) and prescribed the Companies( Indian Accounting
Standards) Rules, 2015 which laid down a roadmap for implementation of these Ind AS. Globally,
different approaches have been adopted to deal with the tax issues arising from adoption of IFRS. For
ensuring horizontal equity across the companies, the Government has issued Income Computation and
Disclosure Standards (ICDS) for computation of taxable income
As the book profit based on Ind AS compliant financial statement is likely to be different from the book
profit based on existing Indian GAAP, the Central Board of Direct Taxes (CBDT) constituted a committee
in June, 2015 for suggesting the framework for computation of minimum alternate tax (MAT) liability
under section 115JB for Ind AS compliant companies in the year of adoption and thereafter. The
Committee submitted its final report in December 2016.
Section 115JB proposed to be amended to provide the framework for computation of book profit for Ind
AS compliant companies in the year of adoption and thereafter. Book profits for MAT to be computed in
alignment with Ind AS from AY 2017-18 for companies to which Ind AS applies.
KrayMan Rationalization Measures
Budget Proposal Existing provision Proposed Amendment Reason for Amendment
Rationalisation of
provisions of
Section 10AA
Applicable from:
AY 2018-19
onwards
As per section 10AA, deduction is
allowed from the total income of
an assessee, in respect of gains
from his Unit operating in SEZ
(Special Economic Zone)
However, courts have taken a
view that the deduction is to be
allowed from the total income of
the undertaking and not from the
total income of the assessee.
Clarification issued
Deduction u/s 10AA shall be
allowed from the total income
of the assessee as per
provisions of the Act before
giving effect to the provisions
of the section 10AA
Deduction u/s 10AA in no case
shall exceed the total income
The amendment is clarificatory
in nature
Restriction on
set-off of loss
from House
property
Applicable from:
AY 2018-19
onwards
Section 71 relates to set-off of loss
from one head against income from
another.
Set-off of loss under the head
"Income from house property"
against any other head of
income shall be restricted to
INR 200,000 for any year
However, the unabsorbed loss
shall be allowed to be carried
forward for set-off in
subsequent years
Alignment with international
best practices
KrayMan
Major Indirect Tax Proposals
Service tax Goods and
Services Tax (GST) Central Excise Customs
With GST around the corner, it is but natural that the Budget has not made significant changes in existing
indirect taxes. In the budget speech, the finance minister mentioned few areas including finalization of
the Model GST Law, IT readiness and consensus between the Centre and the States represented at the
GST Council which indicated the government‟s confidence in moving ahead with GST. The likely date for
introduction of GST is 1July‟2017.
The Rates of Service Tax, Excise & Customs remain same. Certain changes in customs/excise duty
rates have been proposed with the objective to Incentivize domestic manufacturing, Promoting cashless
transactions, improve ease of doing business and export promotion
KrayMan
Major Indirect Tax Proposals
Service tax Goods and
Services Tax (GST) Central Excise Customs
Life Insurance services provided by Army, Naval and Air Force Group Insurance Funds to their members under the Group
Insurance Schemes of the Central Government now exempted.
Exemption granted to services provided by IIM by way of 2 year full time residential post graduate programmes in
management through Common Admission Test is extended even to non-residential programmes.
Following changes will be effective from the date of enactment of Finance Bill:
‒ Services by way of carrying any process amounting to manufacture / production of goods (excluding alcoholic liquor)
proposed to be deleted from the Negative List and inserted in Mega Exemption Notification. Consequently, it is also
proposed to shift the definition of „process amounting to manufacture‟ from the Finance Act, 1994 to Mega Exemption
Notification.
‒ Exemption is proposed to be provided on one time upfront amount in respect of services provided by the State
Government Industrial Development Corporations/undertakings to industrial units retrospectively from 1 June 2007 (the
date on which such services became taxable) upto 21 September 2016. Refund claims in relation to such services to be
filed within 6 months from presidential assent.
‒ Rule 2A of Service tax (Determination of Value) Rules, 2006 to be amended retrospectively from 1 July 2010 to exclude
value of land or undivided share of land from works contract. Further, abatement is also provided where value of land is
included in the contract value.
KrayMan
Major Indirect Tax Proposals
Service tax Goods and
Services Tax (GST) Central Excise Customs
Increase in excise duty on tobacco / tobacco products from 2 Feb 2017 onwards. Changes in rates of excise duty on various
commodities as per notification no. 5-6/2017 dated 2 Feb 2017. Time limit for deciding on the remission of duty is prescribed
as 3 months which can further be extended upto 6 months
Following changes effective from enactment of Finance Bill:
‒ Application to Settlement commission can be filed by a person other than assessee in respect of show cause notice
issued to him in a case relating to assessee. Settlement Commission can amend its order to rectify any error apparent
on record within 3 months from the date of order
‒ Excise duty proposed to be reduced from 27% to 12.5% on motor vehicles falling under tariff items 8702 9021 to 8702 90
29 with retrospective effect from 1 January 2017.
KrayMan
Major Indirect Tax Proposals
Service tax Goods and
Services Tax (GST) Central Excise Customs
Following key changes effective from 2 Feb 2017:
‒ Export duty introduced on Other aluminum ores and concentrates (2606 00 90) @ 30%, and Other Aluminum ores
including laterite (2606 00 90) @ 15%
‒ Change in rate of basic customs duty on imports as per notification no.6 dated 2 Feb 2017
‒ Change in rate of special additional duty as per notification no.4 dated 2 Feb 2017 (also covering goods exempted from
BCD, CVD, SAD).
KrayMan Disclaimer
The intention of the newsletter is to cover highlights of major direct & indirect tax proposals
introduced in India Union Budget 2017. Attempt has been made to cover most of the tax
proposals likely to impact businesses in general. No claim is made to cover each and every
proposal introduced in the budget. The newsletter contains information of general nature and is
not meant to be a substitute for professional advice in any manner. In case the Reader requires
any specific inputs / suggestions / advice from our end, please contact us separately.
KrayMan Who we are
KrayMan was founded by professionals from
consulting and industry experience with a vision to
set up a distinctive accounting services Firm.
Our forte lies in demystifying the complex Indian
regulatory compliance environment thereby making it
easy for our Clients.
We service diverse Client mix of multinationals,
domestic companies, non-corporate entities and
expatriates.
We advise and hand-hold foreign companies in
establishing their operations in India and partner in
their growth story.
KrayMan Global Alliances
Our Motto ‘getting the work done’
We are Member of two prestigious International Networks:
1. Cross Border Associates (CBA): Headquartered in Germany, CBA is a Global
Network of Business Advisers, Legal and Tax experts specializing in cross
border midmarket Mergers and Acquisitions and related services. The Network
has presence in 76 countries globally.
2. Prime Advisory Network (PAN): Headquartered in London (UK), PAN is an
International Accounting Network of Chartered Accountants and Lawyers, having
presence in more than 40 countries globally.
KrayMan Service offerings
Our Motto ‘getting the work done’
Assessment of legal entity
options for entry into India
Setting up of presence in
India and other start-up
services
Simplifying the procedures
and addressing the
bottlenecks
Strategic, Governance &
Management advisory
services
On-going tax & regulatory
advisory & compliance
services
Virtual CFO services
Setting up India
operations
Statutory Audit, Tax Audit,
Internal audit
Review of financial
statements
Risk assessment /
advisory
Certification & Attestation
Internal control reviews,
reporting requirements,
physical verification of
assets
Audit support on behalf of
management /
management letters
Audit
Tax planning & Advisory
Direct tax compliances:
Corporate tax,
Withholding tax,
Expatriate tax, Transfer
Pricing
Indirect tax compliances:
Sales tax, Value added-
tax, Service tax
Litigation management
support
Company law &
Exchange control
advisory & compliances
Tax & Regulatory
Accounting & Financial
Reporting
Preparation of financial
statements
Accounting system
implementation
Forecasting and
projections
Financial analysis of
reports
Payroll processing of
salary
Accounting &
Payroll
KrayMan Service offerings
Design and
implementation of best
practice framework for
internal governance
Setting up standard
operating procedures
(proper authority for
transactions, internal
compliance processes,
adequacy of
documentation, filing
system & record keeping)
Evaluation of internal
controls and monitoring
results
Timely and accurate
adherence with legal
requirements
Virtual CFO
Mergers & Acquisitions
Due diligence
Compliance health-
check
Valuation
Business structuring
Outsourcing
Accounting advisory
services
Corporate finance
Advisory
Building HR infrastructure
for start ups.
HR policy/ manual design
Talent Acquisition and
Induction policies/
programs
Role defining and
Competency framework
Employee Engagement/
communication policies
and programs
Performance
Management System
HR Advisory Corporate
Secretarial
Preparing & maintaining
statutory registers as per
companies law
Conducting directors‟ and
shareholders‟ meetings as
per secretarial standards
Preparation of agenda,
notices, minutes and
resolutions of directors‟ and
shareholders‟ meetings
Preparation & filing of
Annual Return including
Balance Sheet, Profit &
Loss account & other
documents
Preparation and filing of
forms with Registrar of
Companies
Corporate
Secretarial
KrayMan Contact Us
KrayMan Consultants LLP 1170A, 11th Floor, Tower B1
Spaze i-Tech Park
Sector 49, Sohna Road
Gurgaon – 122001 (India)
T: +91 124 4309418
Web: www.krayman.com